The Basics of Life Insurance

Life insurance is an insurance contract, the purpose of which is to protect the beneficiaries of the individual in the contract in the case of the person's death, accidental death, or sickness. Any special stipulations should be present in the contract to include special considerations based on personal preference. A life insurance policy requires monthly payments or premiums. Most policies also function in more ways than one. There are policies called protection policies, which provides a lump-sum amount in case a stipulated event occurs. However, there are also life insurance policies that function as investments. These two categories further give way to different types of insurance, such as term life insurance or whole life insurance. Term life insurance is also known as temporary life insurance. It covers only the period stipulated upon as written in the contract.

On the other hand, whole life insurance covers the insured individual's whole life. It is a permanent insurance policy that will remain in effect for as long as the policy owner is able to pay the premiums on time.

In a life insurance policy, the insured individual is not necessarily the owner of the policy. The one who buys the policy is the owner, but he or she can be the insured individual, or it can be someone else entirely. The owner is the one who has control over the beneficiaries of the contract. The owner also has yet another responsibility, which is to pay the premiums. Premiums are calculated based on different factors, but are generally based on a standard mortality table, which take into consideration statistical data, both internal and external. These mortality tables are often used as the basis for the cost of the premiums because they give an actual summary of probabilities and assumptions based on supported data.

Factors, however, regarding the insured individual are also taken into consideration. Calculation of life insurance rates is not very different from calculations of other types of insurance costs. For a car to be insured, factors such as your driving record and the car's nature and age are all considered. When it comes to life insurance, the same concept applies. Your age, gender, overall health condition, lifestyle, and your habits including smoking and drinking, will all be part of the picture. As can be expected, people who smoke will be charged higher insurance costs.

As for claims, life insurance proceeds can only be claimed upon proof of the insured individual's death. A death certificate is usually the standard requirement. There is also a form that you need to fill up upon claiming insurance. In normal cases, especially accidental death or natural death, the process won't take long, and the requirements are enough to get the claims released. However, if the death is of a different nature, or is suspicious, insurance companies usually take the necessary steps in investigating said death to verify the legibility and honesty of the claim. This is also usually done when the proceeds from the life insurance policy is unusually large. The beneficiaries can decide on whether the proceeds will be given in a single payment or in recurring amounts, also called annuities.